Germany's Role and Strategy in the Euro Area-Determining Factors and Scenarios

Article excerpt

Introduction

Ever since Berlin took centre stage in the management of the sovereign debt crisis in the euro area in 2010, the debate about Germany's role in Europe has not ceased. There has been controversy about Berlin setting the continent's agenda and about a perceived German hegemony due to which the German government can impose European and domestic policy choices. There has even been provocative and populist talk about a "Fourth Reich," implying that Germany could use its economic power to aggressively reign over and exploit its European partners.1

These potential roles attributed to Germany reflect resistance to, if not substantial fear of new German dominance. The spectre of the history of the first half of the 20th century seems to be back. The unease with Germany's new strength should not simply be read as resistance to German dominance as such. It also reflects criticism of German policy positions in the management of the sovereign debt crisis and in the debates about reforming the European governance structures. Considering the substance of Germany's positions provides interesting insights into why some decision-makers and observers opposed, while others backed Germany's new strong role.

The most explicit request for stronger German leadership came from the Polish foreign minister, Rados3aw Sikorski. In a speech in Berlin in November 2011, he demanded of Germany "that, for your sake and for ours, you help [the eurozone] survive and prosper. You know full well that nobody else can do it. I will probably be the first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity."2

Sikorski's remarkable words came in a phase of the crisis in which political disorientation and a perceived failure of moving forward with crisis management and deepening the euro area could easily catalyse a further deterioration of the situation. Meanwhile, deepening the euro area was seen with some ambiguity, in particular by non-members of the currency union. On the one hand, further integration was perceived as a necessity to secure the survival of the single currency and even of the single market. On the other hand, a more deeply integrated core of the EU that would turn into the most important forum for substantial economic policy debate also seemed to pose a threat to the integrity of an EU with 27 members and to the non-members' influence on policy decisions.

In this complex setting, Sikorski called on Germany to assume a new role in Europe as a leader and a potential bridge-builder. It is in particular the quest for active leadership Germany had-and still has-not yet come to grips with. The German unease is as much about not wanting to stick out as the new, dominant power given the weight of Germany's Nazi past, as it is about the discomfort with the new responsibilities and commitments this new role entails.

New commitments materialise, for instance, in Germany's large contributions to rescue packages granted to other euro area members, which can potentially turn from loans into losses. Moreover, the criticism of German inactivity raises broader questions about a German leadership role with regard to helping master strategic challenges for the European continent and appropriate burden-sharing in other policy areas, notably foreign and security policy. Germany's decision to abstain from a vote in the UN Security Council on the no-fly zone over Libya in March 2011 and not to side with its closest allies- France, the U.S. and the United Kingdom (UK)-has raised provocative questions about the German government's foreign policy maturity, and hence its willingness to engage internationally. It was "accused of irresponsible and inconsistent behaviour, abandoning Western consensus, and of having 'failed the test' of leadership."3 Moreover, critics argued that the German government deliberately undermined European unity, and hence questioned its commitment to strengthening the EU. …